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Currency Wars; 1914 all over again?By Ton Coumans I am not one for art, statues or monuments. However last summer I was drawn to the monument in the picture below which stands in a town in France. You will have recognized that this monument commemorates the tribulations of the First World War. There is a lot of symbolism in the statue but it is the French soldier’s sorrowful stare that won't let me go. In WWI France incurred 1.7 million dead. Everyone will see something different, but for me this monument is whispering; my God, what have we done?
The Spirit of 1914 The uncanny thing is that before the outbreak of World War I, most Europeans expected the future to provide an endless stream of good fortunes, to the point of being bored by the prospect. Many soldiers were swept up by the bizarre spirit of 1914, a reckless urge for adventurism under the flag of nationalism. Young men from all countries volunteered to leave their prosperous lives behind and take up a fight with their European neighbors. All those men lusting for adventure and glory and no one was sensing danger. Nemesis Emerges Only a hand full of people realized what lay ahead. A long forgotten quote by one of them reads; "If the scientific nations of Europe were to wage war on one another they would be thoroughly sick of it before it was finished". That quote is by Sir Winston Churchill. He had seen the power of artillery and machine guns in the Boer War and warned against armed conflict in Europe, to no avail. Europe had been at peace for 40 years and the millions of men that charged off to battle had no way of being able to imagine what war would be like, until they found themselves stuck in the horrors of trench warfare. Nemesis, the Goddess of divine retribution, had finally found a way to sink her teeth into Europe, having waited patiently in the back ground during the 40 years of the Belle Epoch. The Spirit of 2006? The question now is; do we stand at a similar point in history where we expected the future to provide expanding, effortless wealth and have we been swept up by the spirit of 2006; flipping houses and living high on mortgage equity withdraws and debt? Does Nemesis have a special surprise for us and what could that be? We are in a global de-leveraging process which is painful, but is it, in itself, truly destructive? I contend that if we are to “fall deep” there will need to be some kind of major break down of cooperation or even “conflict amongst peoples” resulting in a major lose-lose event that sinks the physical economy. What could that be? Frustrated Germany 1914 In the run up to WW1 an influential book was written by General Von Bernhardi titled “Germany and the next War”. The book manifests Germany’s frustration and militancy. Von Bernhardi proclaims that, with her scientific and intellectual achievements, Germany should have a more prominent role in world affairs, more colonial trophies with access to oil reserves. Germany’s GDP had passed that of Great Britain and France and they now wanted more respect. France and Great Britain were maneuvering as best they could to keep Germany out of the game. Frustrated China 2010? Now in 2010 we witness the wide distribution of a book titled “Unhappy China” which expresses China’s frustrations with their current position. China is on its way to become the second economy of the world, yet China is not “embraced” as member of the G8 and has almost no influence in the IMF and World Bank. China is frustrated with the West’s meddling in internal affairs and with the humiliation endured by the Olympic torch run that was, in their perception, disgraced by demonstrations. All the maneuvering by the West now is to keep China out of the game and treat them as a potential threat. Does this have automatic conflict baked into it? The Shape of Future Conflict All out “kinetic” war does not seem realistic and more something of the past century. We have since organized the UN Security Counsel to regulate conflicts involving the use of force. But do we have adequate global institutions for monetary policy? I judge that today every government and their symbiotic Central Bank feel they have the right and obligation to use monetary policy to the advantage of there own short sighted wealth preservation and power games. Could the conflict of the twenty-first century revolve around currency wars? Should we rephrase Churchill’s warning to state; "If the financially developed nations of the world were to wage a war of competitive currency devaluation on one another, they would be thoroughly sick of it before it was finished". Could competitive currency devaluation be the bear market surprise mechanism that pits countries and peoples against one another? World War I vs. Currency Wars The First World War is remembered for the senseless slaughter of trench warfare. Will this period be remembered for disruptive impoverishment of currency warfare? It does seem to have the potential to breed distrust and breakdown cooperation between the nations. It also has a run away nature since it invites tit for tat exchanges. It is inherently instable because the currency that moves first and fast could have the advantage. But does it have the destructive power to sink our global physical economy? Gold of course will be the only money not effected and will offer shelter to a small group. Let’s hope that some years from now we will not find ourselves sorrowfully staring at the horizon and whispering; my God, what have we done. ### Ton Coumans The author holds a Masters degree in Mechanical Engineering and has pursued a life long philosophical study of systems, human and otherwise. The subject of interest is how individuals come to cooperate in the form of communities and societies that develop a common identity, set of beliefs, moral codes and expectations for the future. As such, societies are regarded as living organisms of a higher moral relevance than its basic building block, the single individual. As a living organism, societies seek to grow, expand and thrive in general, whilst competing and cooperating with other societies. The challenge is to assess the state of affairs in a society and compare this to the general beliefs and expectations of that society. When significant discrepancies occur the object is to anticipate how the tension will be resolved and invest accordingly. The author can be reached at m.coumans@xs4all.nl 321gold Ltd |
